Sir, Your support for UK shale gas (“Make haste slowly on UK shale gas”, editorial, August 6) based upon “the reduction in energy prices and the improvement in energy security” is unjustified on both grounds. Even if the extraction, transmission and eventual environmental reinstatement costs were lower than those of Norwegian conventional gas, the end user, industrial or residential, will pay the same and the benefit of the presumed (but at this point unproved) higher operating margin for onshore shale gas extraction will accrue entirely to equity and debt investors in the extraction companies and to the exchequer through corporation tax and petroleum revenue tax.
The only way it could be cheaper would be if the government sought to penalise gas imports through higher duties, which would be illegal under EU and World Trade Organisation rules. As for energy security, it is absurd to imply that gas extracted from the Norwegian sector of the North Sea is less secure than from the UK sector, unless you expect FT readers to believe that Norway could be overthrown by a hostile regime.
Import substitution would, of course, benefit the balance of payments (BoP), but you do not mention this and there has been little (if any) economic analysis to suggest that the UK will run into an unmanageable BoP problem because of gas imports alone. Wider issues of competitiveness and whether the UK can continue to attract foreign direct investment if it suicidally exits the EU are far more likely to weigh on the external position over 20 years.
Above all, the pursuit of shale gas is wrong-headed because it distracts from the overriding public policy objective of de-carbonising the economy.
You report today (“A rising power”, Analysis, August 9) how the surge of efficient Chinese production of solar panels has led to an 80 per cent drop in the capital cost of solar photo-voltaic production and how Germany is already producing 22 per cent of its energy from renewable sources, manifestly without any noticeable impact on overall German competitiveness.
Consequently, the suspicion is that the UK government’s support of shale gas is a political sop to its climate-change-denying supporters – led by Lord Lawson – which, however, may yet backfire as it becomes clear that it risks industrialisation of the English countryside.
With a global glut of conventional gas, which has seen the value of Russia’s Gazprom slashed, the sensible course is to continue to work with our excellent Norwegian and Qatari friends to secure plentiful gas imports by pipeline and liquefied natural gas transportation.
Tom Brown, Senior Credit Executive, Norddeutsche Landesbank, London EC2, UK